In an effort to achieve a developed nation status by 2020, the Malaysian government is embarking on transforming a manufacturing driven economy to a knowledge driven one. In such an economy, the key drivers to growth are its people, knowledge and capabilities; while its business model is based on people and knowledge. Participation in knowledge management requires high investment which means huge capital. However, 99.2% of the business community in Malaysia comprises small and medium enterprises. A gap has been identified in the literature to address the issue of how these small and medium businesses with limitations in funding and capital can participate in knowledge based economy. It is proposed in this dissertation that storytelling be used as a mechanism to allow this to happen. The Nonaka and Takeuchi SECI Model (Socialisation-Externalisation-Combination-Internalisation) together with Collison/Parcel Knowledge Management Model are used as the basis of this study. The primary purpose is to look at the factors that would affect the usage of storytelling as a mechanism to transfer knowledge in a business or an organization. This research is a qualitative study and data was collected using semi-structured in-depth interviews of 18 employees of a private educational institution which had been observed and identified to be using storytelling in its operation. A total of 1018 minutes of interviews were conducted that resulted in 300 pages of interview transcripts. From the data collected, 45 common perceptions emerged and were grouped into 15 emerging patterns which were further refined into 5 different themes. The themes; 1) Exchange Factors 2) Knowledge Flow 3) Personality Preferences 4) Story Characteristics and 5) Story Acceptance form the basis for the new framework proposed in this dissertation.